China direct sourcing strategy is potentially one of the most powerful strategies for organizations that must offer competitive prices to their market, open fast and efficient communication channels with the makers of their products, protect their IP and other assets and more.
It gives you the flexibility of using business services in China without creating a long and inefficient supply chain in case you need to add skills and knowledge your organization doesn’t have inhouse.
I used the word “potentially” because many companies make mistakes.
They make mistakes that not only prevent them from achieving the goals they could have achieved if implementing the China direct sourcing strategy correctly; they get the exact opposite results. They increase their costs, lose control over the quality of their product and worse of all degrade their brand and reputation. This usually happens although business services in China, that can help mitigate these risks are available.
True, China direct sourcing is not for everybody. If your product is still in development stages, or if your finances are not strong enough, China direct sourcing is probably not for you. Also, if you, or someone you hire, don’t have the technical skills to tell a good quality product from a bad one, you need to choose another strategy.
That being said, you can always hire business services in China to build a stronger strengths and skills portfolio to your organization quickly and, if done wisely and relatively low cost. So before you give up, check what business services in China are available.
However, If you say yes to all the following, then China direct sourcing is for you and I warmly recommend you read this post to its end. You won’t be sorry.
Your product has a complete manufacturing file, a factory can look at, and produce your product according to.
When you see your product, you will know if the quality is good or not.
You have enough funds to invest in establishing a direct communication channel with a viable supplier, that will give you both real time updates from the manufacturing floor, and the ability to respond quickly to this information by discussing it with the factory directly and give them your instructions.
So, if China direct sourcing is for you but you are not getting the kind of results you expect, maybe you are making some of the mistakes so many other people are making without even realizing it.
Here 7 common mistakes, you need to make sure you are not making.
Mistake #1: Working with the wrong factories.
People work with the wrong factories for many reasons. Some of the most common are
They don’t have a structured and efficient sourcing process. Therefore their initial candidate list is small and they have very little options to choose from. So they work with the best option even if it does not meet the basic requirements. If you don’t have a good process, this link will help: A simple yet efficient sourcing process
They don’t audit their candidate factories. Traits and capabilities that make a factory suitable for one company, make it the exact opposite for another company. For some people receiving, a good recommendation from friends is enough to make the decision to enter business relationship with a new supplier.
Different companies prioritize differently. Some require low volume high mix, some require speed, some require accurate documentation of every step in the process and some prioritize…price.
There are many reasons why a factory can be good for one company but not good for another, and this is why it is not enough, when a factory comes with good references. You should perform your own audit. Auditing a factory in China takes time, a certain set of skills and sometimes money.
Here too, if you are not working according to a process, your time investment will be very high with little return. More details about the challenges and a good auditing process you can find here: Factory auditing process
Sometimes, even if the factory is capable, supplies high quality product and provides good service, it could still be the wrong factory for you.
The reason is that there are other things that can make a “good” factory “wrong” for you. It could be because the factory is too small, and they can not handle your orders size.
It could be because the factory is already working with your direct competition and working with that factory will result in transferring to your competition your IP.
It could also be that the factory is full of orders and as much as they want, they don’t have the resources to handle more orders.
Mistake #2: Start the quality control process after production is finished.
Quality control costs money and we all wish we could avoid that part of order management. Buy poor quality and late deliveries cost even more. They cost money and damage your reputation. And it doesn’t end there. Negotiating the next order after a failed delivery is nothing like negating the next order after a successful one.
Most companies understand that and arrange for a pre-shipment inspection thinking that will do the job. But a pre-shipment inspection only can only prevent poor quality shipment. It can not prevent late deliveries due to poor quality.
Poor quality is not always the result of lack of attention from the factory, lack of technical skills, production management knowledge, etc.
Many times it is communication problems that cause it. Misunderstandings.
Especially when you are working with a new supplier, miscommunication is natural part of the learning curve.
Just like the previous two reasons, managing quality is better done by a process that works towards mitigating as many risks as possible, not only shipment of poor quality goods.
Pre shipment inspection involves certain cost because a team, inhouse or outsourced has to go to the production site and inspect the goods over there.
However, other quality management actions can be done in remote control and can help a lot in increasing the chances for an on time, high quality delivery.
Here is a link that will give you some good tips you can follow: Production order quality management process http://www.csoprojement.com/quality-control-services-in-china/
Mistake #3: Not having a trustworthy person or team in China.
Things don’t always work the way you planned. Sometimes events take turns that require your involvement and action.
There is a built-in conflict of interest in every buyer – supplier relationship. Professional and ethical companies know how to manage this conflict, but sometimes, even within the grey areas and with goods intentions only, factories make decisions that work against you.
To prevent this from happening you need two things:
A reliable source of information that will report to you about important events clearly and in real time.
A reliable communication channel that will transfer to the factory your instructions and verify they are followed.